The US unemployment rate may surge to 6%, with analysts predicting the Federal Reserve will cut interest rates by 125 basis points to 2.25%

Former Merrill Chief North America Economist David Rosenberg recently issued a warning that the U.S. labor market faces a serious contraction risk in 2026. He predicts that the unemployment rate will soon surpass 5%, potentially reaching 6% by the end of the year, which will force the Federal Reserve to cut interest rates five times by the end of this year, lowering the rate to 2.25%. This forecast is based on multiple specific pieces of evidence indicating deterioration in the employment market.

Employment Market Evolves from Cooling to Contraction

Rosenberg emphasizes that the biggest surprise in 2026 will be people’s realization that the labor market is not just cooling but contracting. This judgment is not unfounded.

According to the latest news, the U.S. unemployment rate has risen from 4% in early 2025 to 4.6% in November 2025, a significant increase. More notably, two key indicators of the labor market are:

• The layoff rate rose to 1.2% in October 2025, the highest level in a year, indicating an increasing trend of proactive workforce reduction by companies
• The hiring rate has “plummeted like hot knife through butter,” with a clear decline in new job creation capacity

The simultaneous deterioration of these two indicators suggests that the employment market has hit a bottom, and the downward trend is intensifying.

The Fed’s Forced Choice

Rosenberg believes that the collapse of the labor market and the resulting recession will leave the Federal Reserve with no choice. Under the pressure of slowing economic growth and rising unemployment, the Fed will inevitably need to take aggressive rate cuts to stabilize the economy.

His prediction is: the Federal Reserve will cut interest rates five times by the end of 2026, totaling a reduction of 125 basis points, ultimately lowering the federal funds rate to 2.25%. This means the Fed will shift from the current high-interest-rate environment into a clearly accommodative cycle.

Potential Opportunities in the Crypto Market

From the perspective of crypto assets, this anticipated development will bring significant environmental improvements. A low-interest-rate environment typically boosts the appeal of risk assets because yields on fixed-income products decline, prompting investors to seek higher-yield alternatives.

Historical experience shows that easing cycles by the Fed are often accompanied by rebounds in the crypto market. If Rosenberg’s forecast comes true, the start of rate cuts could provide a favorable macro backdrop for the crypto market in the second half of 2026.

Summary

Rosenberg’s analysis points to a clear economic trajectory: worsening employment is the main risk in 2026, and the Federal Reserve’s challenge is not whether to cut rates but when to start the easing cycle. As the unemployment rate rises from 4.6% to 6%, the Fed’s policy shift will be a decisive factor.

For crypto market participants, it will be crucial to closely monitor two key indicators: the release of official U.S. employment data and the Fed’s policy statements. If employment data continues to worsen, expectations of rate cuts will further strengthen, making risk assets more supported.